GreeceWatch: Interim government, mixed signals

The pace of developments in the birthplace of democracy accelerates by the hour.

In the latest developments, a new interim government is appointed of hold office until the 17 June parliamentary elections, a run on Greek banks is underway, and eurocrats and europols send very mixed messages on Greece’s future in the single currency zone.

Meet the new boss, or here comes the judge

For younger readers who may not get the reference, here’s Sammy Davis Jr. from the venerable 60’s TV series, Rowan and Martin’s Laugh-In:

From New Europe:

Mr. Panayiotis Pikramenos, president of the Greek Constitutional Court is the new care taker prime minister of the country.

He was appointed by President Karolos Papoulias, as he confirmed that the Parliament, which was elected last Sunday could not produce any government.

New elections are to be held on Sunday 17 June. Before taking this decision Papoulias had called a meeting this morning of the political leaders of the parties which emerged from the last election. The new caretaker government will have a restricted nature and will made up of only a few members having as their main target to organise and oversee the next election. They will take decisions only on everyday matters of the state.

Pikramenos visited the presidential mansion at 3.15 p.m. to be officially appointed. In a televised conversation between the two men, the top judge said the role was “a great burden” but thanked the president for “putting your trust in me.” “I hope I can live up to the task,” he said. Pikramenos, whose name means “embittered,” added that he had perhaps the most appropriate name for the job.

State television added that there had been a dispute between party leaders about who should assume the role with socialist Pasok leader Evangelos Venizelos and conservative New Democracy chief Antonis Samaras reportedly accepting the president’s proposal for technocrat premier Lucas Papademos to continue in his position while the head of the Coalition of the Radical Left (SYRIZA) Alexis Tsipras said the post should go to Gerasimos Arsenis, a veteran socialist and former minister.

In the end, the president decided, in accordance to the constitution, to appoint the head of one of Greece’s three highest courts.

Call it another order to Greek voters on how to cast their ballots in the upcoming election.

From Anthony Faiola and Michael Birnbaum of the Washington Post:

German Chancellor Angela Merkel said Wednesday that she wants to keep Greece on the common euro currency and would be open to “stimulus” that would help foster growth in the troubled European country.

But she held firm to her insistence that Greece had to live up to the commitments it made when it signed onto a $165 billion bailout this year.

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German policymakers say they would be willing to do more to help ease Greece’s short-term economic pain, so long as they were convinced that Greece was serious about implementing the terms of its bailout agreement.

Leaders including Merkel have said that they still believe that opening the Greek labor market, reducing government spending and privatizing state-owned industries remains the best path to getting the country’s economy back on track.

But those measures exacerbate short-term pain, and have caused rebellion among Greek voters, who will return to the ballot box June 17.

Greece could leave the eurozone in an “orderly exit”, the head of the International Monetary Fund, Christine Lagarde, told FRANCE 24 on Tuesday.

In an exclusive interview, Lagarde raised the possibility that the debt-laden nation could quit the eurozone if it failed to meet the terms of a bailout deal negotiated with its EU partners and the IMF.

“If the country’s budgetary commitments are not honoured, there needs to be appropriate revisions, which means either supplementary financing and additional time, or mechanisms for an exit, which in this case must be orderly,” the IMF chief said.

Lagarde conceded that Greece’s exit from the single currency, which had until recently seemed implausible, would come at a severe cost.

“It is something that would be extremely expensive and would pose great risks, but it is part of the options that we must technically consider,” she said.

The head of the European Commission said Wednesday there was “no way” of changing the terms of a 130-billion-euro bailout agreed with Greece, as Athens prepares to return to the polls.

“There is no way of changing the commitments taken by Greece and also by the other 16 euro area member states,” said Jose Manuel Barroso as he outlined a new push for growth across the eurozone in the wake of telephone talks with new French President Francois Hollande.

As official news in Athens pegged June 17 as the date for a repeat election, 10 days after voters gave a majority to anti-austerity parties, Barroso said it was “important not only for the credibility of Greece but also for the credibility of the euro area that agreements are stuck to.”

He added: “It is possible to work with the Greek authorities on measures to enhance growth.

“But frankly, it will not improve the situation of Greece or the euro area in general if the message is that we do not stick to our commitments.”

Barroso underlined: “We will of course fully respect the decision taken by the Greek people.

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“We want Greece to remain part of the family, of the EU and the eurozone.

“But the ultimate resolve to stay in the euro area must come from Greece itself,” Barroso said.

The continued drop of the euro came as German Finance Minister Wolfgang Schäuble categorically ruled out any changes in the continent’s plan to financially support debt-stricken Greece. “This is an aid program that was prepared down to the last detail, we cannot renegotiate it,” Schäuble told Deutschlandfunk radio on Wednesday.

The minister’s warning came a day after Greek political leaders said they were unable to form a new government, paving the way for new elections. Schäuble reiterated his resolve to keep Greece in the euro area, but added it was “a sovereign decision by the Greek people”.

“Speculating about what Greece will choose does not help matters either,” he said. But concerns of contagion are increasingly becoming a threat to the euro. Markets feel the credibility of the currency is at stake.

Earlier in the week, Spain already felt the pressure rising with yields on its 10-year sovereign bonds going up further. And Italy saw 26 of its banks downgraded, adding to fears in the eurozone that the situation may spin out of control.

During their first meeting since François Hollande’s election, the new French president and German Chancellor Angela Merkel tried a different approach with Greek voters: Vote the way we saw and we may sweeten the pot.

From Greek Reporter’s A. Papapostolou:

France and Germany have promised “additional growth measures” to ensure Greece remains within the euro zone.

On his inaugural visit to Berlin, French president François Hollande said he felt a “responsibility” to offer a “sign” of hope to Greek voters, as the euro fell to a four-month low on the collapse of talks in Athens.

“The Greeks should know that, through growth measures and supporting economic activities, we will move in their direction to ensure they stay in the euro zone,” said Mr Hollande after talks with Chancellor Angela Merkel.

The German leader insisted the agreed reforms could not be altered but she too offered the prospect of unspecified growth measures.

“It is my expectation and wish that Greece can remain in the euro,” she said. “We stand ready, whenever Greece wants. Additional measures for growth can be analysed, if and when requested.” Following rained-out festivities in Paris, Mr Hollande arrived 75 minutes late for his inaugural visit to Berlin after his aircraft was struck by lightning. After just hours in office, Mr Hollande was confronted with the first real test of his promised growth agenda: the announcement of fresh elections in Greece after a nine-day political deadlock failed to produce a new government.

If you’re wondering why the Iron Chancellor and the French socialist [sic] decided to do a little buttering up along with their dictating, consider the following.

From Ambrose Evans-Pritchard of the London Telegraph:

With the world’s third largest debt after the US and Japan at €1.9 trillion (£1.18 trillion), it is big enough to bring the global financial system to its knees. It is also in the front line of contagion as the Greek crisis metastasizes.

Yields on 10-year Italian debt jumped 16 points to 5.86pc on Tuesday after Italy’s data agency said the country is sliding even into deeper recession, with GDP shrinking 0.8pc in the first quarter.

Output is now 6pc below its peak in 2008. Italy has been trapped in perma-slump for a decade, the only major state to suffer a fall in real per capita income since 2000.

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Hans Redeker from Morgan Stanley said the EU’s mishandling of Greece has put Italy in grave danger. “The irrevocability of the eurozone is a valuable asset, and they are throwing it away. Global investors are preparing for the day Greece leaves,” he said.

The IMF said Italian bank exposure to the state is 32pc of GDP, including all forms of lending. “We are looking at this number very closely,” said Mr Redeker. Almost half of this is owed to foreigners. Italy’s central bank owes a further €278bn in ‘Target2’ claims to peers in Germany, Holland, Finland and Luxembourg, reflecting capital flight.

Italy’s former premier Romano Prodi said the EU risks instant contagion to Spain, Italy, and France if Greece leaves. “The whole house of cards will come down”, he said.